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Payment Systems

Introduction | Roles | Modes | Clearing & Settlement | Framework | Achievements | RTGS

Summary of Payments System Achievements in Nigeria - 1993-2007

1. Retail Payments

   Clearing and Settlement Systems
   The Nigerian Automated Clearing System (NACS) was established by the CBN in collaboration with other stakeholders with a view to ensuring processing efficiency in the Cheque and other retail payment modes. NACS rides on the Nigerian Inter­bank Settlement System (NIBSS) infrastructure and began operation in 2002 in Lagos before it was later extended to Abuja in 2005.

   Currently, clearing activities in all other Non­NACS clearing houses across the country have been semi­automated using the MICR technology which began since 1991. The MICR technology was upgraded in 2007 in preparation for effective interface with the T24 banking application of the Bank. Similarly, the Bank issued circular requesting banks to integrate their banking applications with the NACS infrastructure.

   The Central Bank of Nigeria in its bid to enhance the efficiency of the cheque clearing system and in recognition of improvements in the clearing infrastructure, harmonised the clearing cycles at T+2 9three working days for both upcountry and local cheques. The harmonization of the clearing cycles is expected to facilitate the reduction in float arising from cheque clearing and increased the efficiency of the payments system.

   In furtherance of its activities towards making the payments system accessible nationwide, the Bank opened six additional clearing zones at Awka, Asaba, Osogbo, Umuahia, Lokoja and Gombe between February and April 2008. This brings the total clearing zones nationwide to 28.

   The number of settlement banks remained eleven while the settlement collateral remained N15 billion for each settlement bank.

   Nigeria Cheque Printer Accreditation Scheme (NICPAS)
   The Nigeria Cheque Standard became fully operational in the first quarter of 2007 while a total of twelve (12) printers were accredited by the CBN under the NICPAS. The Cheque standard is expected to facilitate reduction in the MICR Reject rate and cheque fraud, amongst others.

   Electronic Card Transactions
   The volume and value of electronic card transactions stood at 17,721,658 and N148.72 billion as at December 31, 2007 representing increases of 36% and 72% over the figures of 13,029,583 and N86.22 billion recorded in 2006 respectively. The growth in the volume of transactions could be attributed to a number of factors which included the introduction of new products such as Naira credit cards, growing connectivity of point­of­sales terminals via GPRS, and increased public awareness. Available data on various e­payment channels for 2007 indicated that Automated Teller Machine was the most patronized channel accounting for over 88% of the total e­payment transactions while mobile payments was the least in value terms. See the detailed breakdown below:
   

   Payment Channels	Volume (%)	Value (%)
   ATM	88.77	88.46
   WEB	5.10	7.14
   POS	2.38	4.33
   MOBILE	3.75	0.07
   	100%	100%




2. Wholesale Payments

   The Real­Time Gross Settlement System (RTGS) commenced operations on December 18, 2006. The CBN named its RTGS CBN Inter­Bank Funds Transfer System (CIFTS) which had all the twenty­four deposit money banks as direct participants. The system facilitates effective implementation of monetary policy. Types of transactions handled by CIFTS include inter­bank funds transfers, third­party funds transfers, and net settlement from clearings.

   During the year 2007, activities in the inter­bank transfer recorded a significant growth as the volume of transfers among participants of the CBN Inter­Bank Funds Transfer System (CIFTS) increased by 56.01 per cent from 92,908 to 143,854 transfers. The value of transfers also shot up by 121.87 per cent from N29,164.98 billion to N64,709.57 billion.

3. Payments System Vision 2020

   In continuation of its determination to develop a robust payment system the National Payments System Committee (NPSC) developed a strategic document for the development of the national payment system known as Payments System Vision 2020; it was presented to stakeholders in 2007 at a forum. Sequel to the incorporation of the inputs at the stakeholders forum, the implementation of the document, a subset of the Financial System Strategy (FSS 2020), commenced in August 2007 with the inauguration of the Payments System Working Groups.

   The working groups were saddled with the responsibility of facilitating the implementation of the strategy by providing needed guidelines, procedures, rules and regulation for the effective implementation of the initiatives and infrastructure recommendations outlined in the Payments System Vision 2020. The following were the responsibilities as well as the activities of the working groups:

   •  Person to Person Working Group has the responsibility of the implementation of the use of mobile payments to effect retail person to person payments. The group has conducted an industry review along with the scooping of responses to the CBN’s Request for Information on Person to Person Payments. The group was about finalising the business proposition for the implementation of a pilot programme.

   • Government Supplier Working Group is to work out modalities for ensuring that payments to supplier and contractors of government at the three tiers are made electronically. The group concluded work on the minimum infrastructural requirements for the implementation of electronic payments of government supplier payments by Ministries, Departments and Agencies (MDAs). In addition, a review of the financial regulation is being carried out in order to update the regulation to accommodate electronic transactions.

   • Consumer Bills Payments Working Group is mandated to articulate rules and regulation as well as code of conduct which will facilitate widespread use of electronic consumer bills payments methods. Within the review year the group had reviewed current regulations which could impact on consumer bills payment.

   • Taxes Working Group has the responsibility for outlining the framework for the payments of taxes electronically. The work group had developed questionnaire for the “as is” review of taxes payments in the country.

   • Salary Payments Working Group is to develop the framework for the implementation of electronic payments of salaries by both private and public employers with not less than 50 staff in their payroll. The group is conducting a review to ensure that the various stakeholders have the capacity to initiate and accept electronic files for payments of staff salaries.

   • Securities and Settlement Working Group, during the year, completed the documentation of securities trade flows (exchange and OTC) from trade to settlement. This was in pursuance of its mandate to develop modalities for the integration of the CBN Inter­Bank Funds Transfer System (CIFTS) and Central Securities Clearing System (CSCS).

   • Cards Working Group has the responsibility for reviewing the guidelines, rules and regulation to improve the card payments infrastructure.

   • RTGS Working Group is responsible for developing the framework for enhancing the CBN Inter­Bank Funds Transfer System (CIFTS).

   • Cheque and ACH Working Group was given the responsibility to facilitate the enhancement of the cheques and ACH infrastructure with required rules and regulations as well as identifying areas of improvements to the infrastructure.

      

   Two special interest groups were also inaugurated namely, Legal Special Interest Group and West African Monetary Zone (WAMZ) Special Interest Group. The Legal Special Interest Group is saddled with the responsibility of coordinating drafting of required amendments to existing laws and/or drafting of new laws which would facilitate the development of the payments system. West African Monetary Zone (WAMZ) Special Interest Group is mandated to ensure that developments initiatives in the country are in line with the WAMZ Payments System Development framework.

   The eleven working group listed above report to the Payment Infrastructure and Strategy Committee (PISC) whose membership include all the chairmen of the working group with Director, Banking Operations, CBN as the Chairman. The Director of BOD periodically reports on the developments to the National Payments System Committee (NPSC) headed by the Governor, CBN. The NPSC provides strategic direction for the development of the national payments system.

Summary of Nigerian Payments System Achievements 1993-2007

Data On Electronics Payments Transactions For 2003-2007

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